Caisse de depot interested in buying stake in AltaLink from SNC-Lavalin

CP

MONTREAL - The Caisse de depot confirmed Wednesday that it is interested in acquiring a minority position in AltaLink even as the Quebec pension fund manager continues to boost its already leading stake in SNC-Lavalin, owner of the Alberta electricity transmission company.

"We think that it's a quality asset with intrinsic value, well-anchored in the real economy which is, therefore, well-aligned with our strategy," spokesman Maxime Chagnon said in an interview.

Montreal-based SNC said Monday that it was seeking to sell a stake in AltaLink, which owns more than half of Alberta's electricity grid.

The Caisse announced Wednesday that it now holds nearly 15.5 million shares, or 10.2 per cent, of SNC (TSX:SNC) after adding 445,000 shares at an average price of $44.44. That's up from six million shares as of Dec. 31.

At Wednesday's closing price, its holding is valued at $680 million.

The Caisse said it may change its interest in the engineering giant based on market conditions or other relevant factors. Securities regulation requires investors to disclose when their ownership of a company reaches 10 per cent.

Chagnon said the Caisse's decision to purchase more SNC-Lavalin shares reflected its continuing confidence in the company and wasn't prompted by the AltaLink sale or other specific moves.

"As an investor we see a certain momentum of change taking place, particularly with the decision to sell a portion of its interest in a natural gas power plant Astoria Energy in N.Y. and AltaLink," he added.

Industry observers have said the sale of a minority stake in SNC's second-largest infrastructure investment should help to increase the company's share price and would be very attractive to pension funds such as the Caisse.

It was unclear if other large pension funds are also looking to acquire a stake in AltaLink. Canada Pension Plan Investment Board spokeswoman Linda Sims said the policy of the CPPIB is to not comment on "any possible investment activities."

SNC-Lavalin said its existing shareholders don't have any special acquisition rights as far as AltaLink is concerned, but that in addition to price it is seeking a partner with whom it can have a "good working relationship."

The company, which has been reducing its investments in infrastructure assets, said all options for AltaLink would be considered, including a private sale, strategic alternatives or turning to the public market.

AltaLink operates about 12,000 kilometres of transmission lines and 280 substations in Alberta, serving about 85 per cent of the population. It also received regulatory approval in December for a $1.5-billion transmission line extension to run 350 kilometres from Genessee, west of Edmonton, southward to Langdon, east of Calgary.

SNC-Lavalin's infrastructure portfolio also includes the Highway 407 toll road near Toronto, a Montreal hospital and the Montreal symphony hall.

Earlier this year, the company signed a deal to sell 66 per cent of its minority interest in Astoria Project Partners II LLC, which owns and operates the gas-fired Astoria II power plant in New York City.

It is also looking to sell an airport in Malta, but has invested in Ottawa's first-ever light rail transit system as part of the Rideau Transit Group Partnership.

The sale of a minority portion of AltaLink will relieve SNC-Lavalin of some of its obligations to fund AltaLink's expansion, which industry observers believe could be $600 million to $1 billion over the next three years.

Analysts suggest AltaLink is worth upwards of $1.5 billion, or about $10 per share. That's equivalent to nearly a quarter of SNC-Lavalin's trading price, which closed up 32 cents at $44 Wednesday on the Toronto Stock Exchange.